EU STEEL PRICES STILL UNDER PRESSURE BUT NEARING THE BOTTOM

A great number of market players are strongly critical of the size of the current EU mill production cuts. They consider that they are insufficient to bring order back into the marketplace. Producers have failed to announce new prices for second quarter deliveries. It seems that the traditional mode of monthly or quarterly pricing no longer exists. Customers continue to purchase the absolute minimum and, wherever possible, from local or imported stocks. Therefore, selling values continue to head downwards with buyers becoming increasingly nervous about where they will bottom out. Meanwhile, finance problems are an additional worry for customers and suppliers alike, as insurers are cutting cover and making a sluggish business environment even slower.

It is difficult to find any positive aspects relating to German business activity. Consumption is lacklustre. End-users have no expectations of any significant improvement during 2009. Customers are only purchasing small quantities, often from stock, and demanding the lowest possible prices. The priority at the moment is to reduce inventories. Some distributors confirm that they are ordering only 30 percent of their normal volumes. It is difficult to assess selling values because the mills deal with each enquiry on an individual client basis, depending on quantity and specification. Material is available from the dockside very cheaply and domestic steelmakers are coming down to meet these prices because their order books are low.

Demand remains weak in the French market and prices have continued to fall as it is possible to get a discount for significant tonnages. Further decreases could occur as the month progresses but some sources believe that values are now close to stabilising. Distributors still have fairly high stocks, as it is difficult to reduce them. Several service centre clients are requesting quotations but are not actually purchasing yet. Imports have started to reappear with the arrival of some Asian material, which was ordered at the end of January. However, it is currently no cheaper than its domestic equivalent.

Consumption is at a very low ebb in Italy. Nevertheless, recent government initiatives such as incentives for the car industry and huge infrastructure investments should go some way to addressing the decline in due course. Although stocks are reducing, there is no price recovery so far. Distributors report that March activity, in volume terms, was down 50 percent on the comparable period in 2008. According to traders, import business is very slow. There has been some mild interest in Turkish material but at lower prices than a month ago.

There is little price stability in the UK and the pressure is still downwards. However, buyers are placing forward orders, albeit only small quantities. Demand is sparse and all the major consuming sectors have large amounts of stock still in the system. Service centres are selling below replacement costs, putting additional pressure on mill prices. New import deals are few and far between because customers are only interested in short-term survival at present. However, there are cargoes of unsold foreign steel at the docks which are becoming cheaper on a daily basis.

The Belgian market is quiet. Service centres claim they have registered a drop of about 30 percent of their sales volume compared to the previous year. Their main concern is that stock values are so much higher than retail prices. In Spain, the European mills have adopted an aggressive stance against third country importers and are reducing values accordingly. Because the lower prices are widely discussed, end-users are also pushing for further concessions from the distributors, whose profit margins were already under threat. Service centre activity is reportedly down by 60 percent, year on year. Several have commented that, during the last two to three weeks, the negative trend appears to have halted and business is stabilising, albeit at a disastrously low level.

Source: MEPS - European Steel Review - click here for a free sample copy

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